Have you ever suspected you’re self-sabotaging your own efforts to lower your car insurance rates? You're not alone. Many people wonder why their premiums continue to rise even as the rates their friends and acquaintances pay decline.
In most cases, the reason involves risk -- specifically, the risk your insurer must assume in order to continue extending coverage to you. The more risk you present, the more inclined your insurance company will be to raise your premiums. In the space below, we'll cover six activities guaranteed to raise a red flag with your insurer, and one that affects nearly everyone.
No. 1 - Caught Drinking and Driving
Driving under the influence of alcohol or drugs indicates you were willing to risk causing an accident. Your insurance company must pay for damages and injuries resulting from such an incident. Given this, your decision poses an enormous risk for them going forward.
Your insurer may simply raise your premiums to compensate them for the increased risk. However, there is also the possibility your policy will be cancelled all together. A cancellation will make it difficult to obtain coverage elsewhere at a reasonable price.
No. 2 - Modify Your Vehicle with Expensive Upgrades
Car modifications can boost the performance of your vehicle, or give it an aesthetic appeal that reflects your personality. The problem is, your insurance company may consider such upgrades and enhancements risky --and that means higher premiums.
Upgrades designed to improve your vehicle's performance (i.e., a souped-up engine or modified exhaust system) can change its overall handling and safety rating. They can make your car riskier to drive. Aesthetic enhancements (such as high-end rims) might make your vehicle more costly to repair or replace. This too increases your insurer's risk.
No. 3 - Cause a Collision
The fastest way to inadvertently boost your insurance rates is to cause an accident. Nothing sends a clearer signal to your insurance company that you pose a higher risk of future claims. Depending on your driving record and your insurer, your rates could potentially double.
Some companies offer a feature called “accident forgiveness” to policyholders with spotless driving records. It applies to first-time incidents. If your company offers this feature, it's important to realize a first-time accident is not actually forgiven. Your insurer will merely refrain from increasing your premiums as high as they might otherwise have done so. If you cause a second accident, nothing will protect your rates.
No. 4 - Purchase a Car with a Poor CLEAR Rating
One of the criteria insurance companies use to evaluate risk is the type of vehicle driven by the policyholder. Every car, truck and SUV is rated according to its claims history. This is done via the Canadian Loss Experience Automobile Rating (CLEAR) system. Vehicles with a track record of fewer and less-costly claims are given lower rates (other factors remaining equal). Conversely, those associated with frequent and costly claims are given higher rates.
If you purchase a vehicle with a poor CLEAR rating, and your previous car was rated well, your insurer is likely to raise your premiums.
No. 5 - Add Unnecessary Coverage to your Policy
You need accident benefits, third-party liability, and uninsured/underinsured motorist coverage. All three are mandated in every province and territory. However, there is coverage that’s optional. For some people, buying them needlessly raises their premiums.
Two good examples are collision and comprehensive coverage. Neither is mandatory -- both are expensive -- and both are unnecessary for many consumers, particularly those with old and low-value vehicles. In such cases, carrying that coverage is akin to throwing money away.
No. 6 - Lower your Deductibles
Your deductibles are the amount of money you agree to pay when filing a claim. For example, suppose falling rocks damage your car and repairs will cost $2,000. If your deductible is $750, you would need to pay that amount before your insurance company pays the remaining $1,250.
The higher your deductibles, the less risk there is for your insurer. After all, you are essentially agreeing to pay a greater portion of each claim. This means that lowering your deductibles increases your insurer's risk, and will likely result in an instant boost to your premiums.
No. 7 - Neglect to Shop Around for Lower Rates
Technically, this activity doesn't increase your insurance company's risk. However, over time, neglecting to shop around will cause you to pay far more for your coverage than would otherwise be the case.
The auto insurance industry is a competitive one. As a result, rates settle across a broad range. At any given time, the highest and lowest quotes for the same set of coverage and deductibles span hundreds of dollars. Unless you compare quotes from several insurance companies on a regular basis, you'll likely end up paying more than necessary. Bottom line: Shop around.
In most cases, the reason involves risk -- specifically, the risk your insurer must assume in order to continue extending coverage to you. The more risk you present, the more inclined your insurance company will be to raise your premiums. In the space below, we'll cover six activities guaranteed to raise a red flag with your insurer, and one that affects nearly everyone.
No. 1 - Caught Drinking and Driving
Driving under the influence of alcohol or drugs indicates you were willing to risk causing an accident. Your insurance company must pay for damages and injuries resulting from such an incident. Given this, your decision poses an enormous risk for them going forward.
Your insurer may simply raise your premiums to compensate them for the increased risk. However, there is also the possibility your policy will be cancelled all together. A cancellation will make it difficult to obtain coverage elsewhere at a reasonable price.
No. 2 - Modify Your Vehicle with Expensive Upgrades
Car modifications can boost the performance of your vehicle, or give it an aesthetic appeal that reflects your personality. The problem is, your insurance company may consider such upgrades and enhancements risky --and that means higher premiums.
Upgrades designed to improve your vehicle's performance (i.e., a souped-up engine or modified exhaust system) can change its overall handling and safety rating. They can make your car riskier to drive. Aesthetic enhancements (such as high-end rims) might make your vehicle more costly to repair or replace. This too increases your insurer's risk.
No. 3 - Cause a Collision
The fastest way to inadvertently boost your insurance rates is to cause an accident. Nothing sends a clearer signal to your insurance company that you pose a higher risk of future claims. Depending on your driving record and your insurer, your rates could potentially double.
Some companies offer a feature called “accident forgiveness” to policyholders with spotless driving records. It applies to first-time incidents. If your company offers this feature, it's important to realize a first-time accident is not actually forgiven. Your insurer will merely refrain from increasing your premiums as high as they might otherwise have done so. If you cause a second accident, nothing will protect your rates.
No. 4 - Purchase a Car with a Poor CLEAR Rating
One of the criteria insurance companies use to evaluate risk is the type of vehicle driven by the policyholder. Every car, truck and SUV is rated according to its claims history. This is done via the Canadian Loss Experience Automobile Rating (CLEAR) system. Vehicles with a track record of fewer and less-costly claims are given lower rates (other factors remaining equal). Conversely, those associated with frequent and costly claims are given higher rates.
If you purchase a vehicle with a poor CLEAR rating, and your previous car was rated well, your insurer is likely to raise your premiums.
No. 5 - Add Unnecessary Coverage to your Policy
You need accident benefits, third-party liability, and uninsured/underinsured motorist coverage. All three are mandated in every province and territory. However, there is coverage that’s optional. For some people, buying them needlessly raises their premiums.
Two good examples are collision and comprehensive coverage. Neither is mandatory -- both are expensive -- and both are unnecessary for many consumers, particularly those with old and low-value vehicles. In such cases, carrying that coverage is akin to throwing money away.
No. 6 - Lower your Deductibles
Your deductibles are the amount of money you agree to pay when filing a claim. For example, suppose falling rocks damage your car and repairs will cost $2,000. If your deductible is $750, you would need to pay that amount before your insurance company pays the remaining $1,250.
The higher your deductibles, the less risk there is for your insurer. After all, you are essentially agreeing to pay a greater portion of each claim. This means that lowering your deductibles increases your insurer's risk, and will likely result in an instant boost to your premiums.
No. 7 - Neglect to Shop Around for Lower Rates
Technically, this activity doesn't increase your insurance company's risk. However, over time, neglecting to shop around will cause you to pay far more for your coverage than would otherwise be the case.
The auto insurance industry is a competitive one. As a result, rates settle across a broad range. At any given time, the highest and lowest quotes for the same set of coverage and deductibles span hundreds of dollars. Unless you compare quotes from several insurance companies on a regular basis, you'll likely end up paying more than necessary. Bottom line: Shop around.